Until recently, the cost of orthopedic and spine devices weren’t inhibitory for providers, even though 700 percent mark-ups on these devices were the norm. Surgeons were able to select their preferred implants and payor reimbursement would cover the cost. However, with a recession at hand and incentives for lowering the cost of care, more surgeons are looking for high quality implants at the lowest cost; that’s where small orthopedic and spine device companies like The Orthopaedic Implant Company come in, which offers implants to providers at their retail price.
“We founded the company about a year ago to meet the needs of surgeons who were frustrated with the high cost of orthopedic implants and our healthcare system’s inability to pay for [them],” says Itai Nemovicher, president and co-founder of The Orthopaedic Implant Company. “If we tried to do this five years ago, it probably wouldn’t have worked out, but now as physicians and hospitals are forced to align their interests, part of which is cost containment, there is a lot more care on the surgeon’s side to use cost-effective implants.”
Additionally, more orthopedic and spine surgeons are taking their cases out of the hospital and into an outpatient setting. Surgeons who are owners in ambulatory surgery centers also have a heightened awareness of the costs associate with care and are always looking for ways to increase profitability without compromising patient care.
Despite the cost-savings, not all surgeons have been quick to adopt lower-cost implants from companies like OIC, because the lower cost is balanced by eliminating the sales representative position. Sales representatives from most companies strike the deal, stock the implants and sit in the OR in case the surgeon needs assistance during the procedure; at OIC, none of those services are available.
“There’s no handholding in what we are doing, but the majority of the products in our current portfolio are for procedures surgeons shouldn’t have trouble performing themselves,” Mr. Nemovicher says. “There needs to be a paradigm shift in the culture of the OR where surgeons and hospitals are a little less sales representative-dependent before we can expand our portfolio to include more advanced products.”
OIC isn’t trying to replace sales representatives entirely, Mr. Nemovicher says; instead, they are looking for a way to provide affordable implants for cases where surgeons may not need assistance. Sales representatives still have a place in the device company-physician relationship under the retail pricing model, but its more educational than ancillary. “There will always be a need for assistance with new innovative techniques and implants and I think large medical device companies play a big role in innovation and surgeon education,“ he says.
Here are five things surgeons and hospitals need to know about transitioning to retail implants:
- Retail-price implants meet industry quality standards. Retail priced implants are held to the same regulatory standards as large device companies and must comply with the same quality standards before being released in the market. Mr. Nemovicher says OIC implants are independently biomechanically tested against industry-standard devices to make sure they are comparable. “We make the results from of our biomechanical data available to physicians,” he says. “We offer the lowest cost implant available without compromising on quality.”
- Surgeons can still use brand implants for cases. Just because surgeons decide to contract for retail implants doesn’t mean they can’t use brand implants for their cases. Using both retail-priced implants for routine cases in combination with name brand implants for complex cases can yield profitability. ”By utilizing lower-cost implants on commodity type products, surgeons open up the availability of using higher cost products in special cases that may have been a strain before,” says Mr. Nemovicher.
- The OR can still run without device representatives. The transition to using implants and stocking inventory independently may be a challenge at first, but will save money in the long run, says Mr. Nemovicher. If the hospital has a strong staff and surgical tech team, the transition can be made with relative ease. ”Some hospitals are able to handle the responsibility of controlling inventory and making sure the right instruments are available for the surgeons,” he says. “Some are not, and in those cases retail-priced implants may not be for them.”
- Retail pricing can make Medicare cases more profitable. Medicare has notoriously low reimbursement rates, but implant companies still charge the same price per implant regardless the payor. Since retail implants are already available at a lower cost, they can make Medicare cases more affordable for providers. ”Right now, we are focusing strongly on devices for hip fractures, which are common among older patients who have Medicare,” says Mr. Nemovicher. “If we can save money for hip fracture patients, that’s a big benefit to the system.”
- There should be common goals between implant companies and providers. Healthcare providers and implant companies should have the same goal — to provide the best care possible for patients, says Mr. Nemovicher. However, in today’s market that isn’t always the case; the cost of implants is rising significantly, leaving some patients without the ability to undergo elective treatment.
“The rising costs of implants are outpacing our system’s ability to pay for them,” he says. “If OIC can contribute to the driving down of the cost of implants, we have accomplished our mission. We want to do what is best for physicians and hospitals, but our primary goal is doing what is best for patients.”
Written by Laura Miller | November 23, 2011